

'It's crazy': Cashed-up but nothing to buy

Nila Sweeney
Nila SweeneyReporter

The share of pre-approved loans that failed to convert to contracted mortages has doubled since property prices started rising in June last year as buyers struggled to find the right property amid persistently low supply.

Data compiled by Digital Finance Analytics shows the proportion of mortgage committed but not taken has jumped to 40.38 per cent nationally.A sizeable chunk of that, 14.81 per cent, was due to lack of stock.

Sydney first-home buyer Luisa Low got loan pre-approval eight months ago but hasn't been able to buy due to low stock. Jacky Ghossein

More than two in five (42.45 per cent) Sydney buyers failed to convert their pre-approvals and 16.42 per cent were unable to find a property.

Sydney-based first-home buyer Luisa Low has been searching for more than eight months after getting her mortgage pre-approval to buy a home worth up to $1.5 million, but her attempts were foiled by the scant offering.

"We started looking before the federal election, when prices were lower and we found it impossible to actually buy anything," she said.


"It has gotten harder in the last three months because there hasn't been anything on the market at all.

"I know a lot of people haven't been able to buy because we kept seeing the same buyers at open houses for the past six months. Everyone's in the same boat."

Ms Low said some buyers even started turning up at the first open house with the contract already signed.

"People are getting desperate. It's crazy," she said.

"We're ready to buy and have our finances sorted, but there's hardly any listings. If something comes up, it gets sold at a ridiculous price.

"It's frustrating because I have to renew my pre-approval every three months to keep it current."

It's a similar story for buyers in Melbourne, where the share of pre-approvals that were not taken up rose to 40.20 per cent since the middle of 2019. Like Sydney, nearly half (14.76 per cent) was due to lack of suitable property.


In Brisbane, the numbers were not as dire, but showed a similar trend. The share of mortgage commitments that failed to convert has doubled to 24.54 per cent.

Mortgage broker and Shore Financials chief executive officer Theo Chambers said he hadn't seen anything like it before.

"I write more than $200 million worth of mortgages each month and about half of it fail to convert due to low stock, among other things," he said.

"The lenders were ready to go, but homebuyers were hindered by the lack of stock available since spring.

"I've been in lending for 10 years and I haven't seen a trend like this. Stock levels were getting less and less at a time when mortgage commitments were booming."

Mortgage broker Justin Doobov of Intelligence Finance said about one in five of his pre-approved clients ended up not buying because they couldn't find a suitable property.

"Some might miss out and they get disheartened and decide not to buy, or they simply cannot find the right property," he said.

Low rates a double-edged sword


Mr Chambers said that while the record low interest rates had fuelled a surge in pre-approvals, it had also reduced the number of sellers.

"No one has to sell," he said. "The low interest rate means people who want to upsize can now afford to keep their existing property and turn it into an investment, and still buy their next home.

"In the past, when you upsize, you have to sell your old home because you can't afford to keep them both. But now upsizers are just keeping it as investment, so nothing's being sold."

AMP chief economist Shane Oliver said the rising failure rates of pre-approved loans could result in lower transactions.

"Volumes normally rise when finance commitments rise, but this hasn't been happening due to low stock," he said.

"We're seeing rising housing finance commitments, but anecdotal evidence shows these are not translating into actual lending. People aren't trading up because they can't find a replacement home and are uncertain about the economic outlook."

Leading property coverage delivered to your inbox

Sign up to our new weekly Inside Property newsletter

Sign up now

Read More

Nila Sweeney

Most Viewed In Property